FOR IMMEDIATE RELEASE
March 15, 2005
DCA Increased Citywide Inspections by 50%; Warns
Consumers to Avoid High-Interest Refund Loans
More than halfway through the tax season, the New York
City Department of Consumer Affairs (DCA) today announced
it has cited 111 tax preparers for not complying with
disclosure requirements mandated by City law when preparing
taxes, including providing copies of the Taxpayers
Bill of Rights, clearly disclosing refund anticipation
loan (RAL) costs, and more. To ensure consumers are protected,
the DCA has stepped up inspections this year by 50%, checking
nearly 200 locations citywide. In addition, the DCA cited
four tax preparers for deceptively advertising high interest
refund anticipation loans, with one using the catchphrase
Free Electronic Filing, Checks in 5 Minutes.
Tax preparers should help you, not hurt you. Aggressively
enforcing this law helps make that happen, said
DCA Commissioner Gretchen Dykstra. Consumers filing
their taxes have a right to know their forms will be prepared
correctly, what qualifications the preparer has, and any
fees or charges they will pay. We strongly urge consumers
to ask for a copy of the Taxpayers Bill of Rights,
avoid high-interest refund anticipation loan products
that promise fast money at huge costs, ask if they qualify
for the EITC, and learn how to reach your preparer after
Tax preparers, with the exception of CPAs, enrolled
agents, and attorneys, are required to give each customer
a free, current, and legible copy of the Consumer Bill
of Rights Regarding Tax Preparers or have it conspicuously
posted at their place of business. Tax preparers who offer
RALs must disclose the cost of the loan prior to preparing
the loan documents. The Taxpayer Bill of Rights outlines
what consumers need to know when having their taxes prepared,
including the qualifications of the preparer, the difference
between rapid refund products (such as those that directly
deposit refunds into a consumers bank account) and
high-interest refund anticipation loans, how fees are
calculated and charged, and more.
Under City law, it is illegal for a tax preparer to:
-Misrepresent his or her qualifications.
-Guarantee a tax refund or that a taxpayer will not be
audited by any government tax agency.
-Charge a fee based upon the amount of tax owed or refund
-Claim to give taxpayers an instant tax refund
that is actually an interest-bearing loan.
Refund anticipation loans (RALs) are loan products offered
by many tax preparation services in which the consumer's
anticipated refund is used as collateral for the loan.
The loan proceeds cover the anticipated refund - as well
as other fees - at exorbitantly high interest rates. In
actuality, a tax refund can be obtained from the Internal
Revenue Service (IRS) within 14 days or less if filed
electronically and deposited directly in a consumers
By law, any advertisement for a RAL must conspicuously
identify it as a loan, and disclose that a fee or interest
will be charged by the lender. In addition, a tax preparer
must disclose the following to consumers and provide consumers
with a written notice in English and Spanish stating:
-That a taxpayer is not required to take out a
-The fees to be paid for taking out such a loan.
-The estimated annual percentage rate to be paid for the
loan based on the amount of time the loan will be outstanding.
-The approximate loan amount the taxpayer will receive.
-The approximate date by which the taxpayer can expect
to receive the loan amount.
DCA continues to work with trade groups to further inform
preparers of their responsibilities, and additionally
has reached out to preparers who were inspected in the
Also during the tax season, consumers should ask their
tax preparer if they qualify for the Earned Income Tax
Credit, a federal, state, and city tax credit that could
return a maximum of nearly $6,000 in cash refunds to qualifying
working families making less than $35,000 a year. The
DCA coordinates New York Citys EITC Campaign, which
through its private, non-profit, and government partners,
sponsors dozens of sites where qualified staff prepare
taxes for free at locations citywide.
To file a complaint or to request copies of the Taxpayer
Bill of Rights in English and Spanish, DCAs Tax
Preparation Services consumer guide, or for information
on the citywide Earned Income Tax Credit campaign and
locations to have taxes filed for free, call 311 or go
online at www.nyc.gov/consumers.